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OPTIMAL DIVIDEND–REINSURANCE WITH TWO TYPES OF PREMIUM PRINCIPLES

Published online by Cambridge University Press:  09 December 2015

Hui Meng ,
Ming Zhou  and
Tak Kuen Siu
Hui Meng
Affiliation:
China Institute for Actuarial Science, Central University of Finance and Economics, Beijing 100081, People's Republic of China E-mail: menghuidragon@126.com
Ming Zhou
Affiliation:
China Institute for Actuarial Science, Central University of Finance and Economics, Beijing 100081, People's Republic of China E-mail: mzhou.act@gmail.com
Tak Kuen Siu
Affiliation:
Department of Applied Finance and Actuarial Studies, Faculty of Business and Economics, Macquarie University, Sydney, NSW 2109, Australia E-mail: Ken.Siu@mq.edu.au; ktksiu2005@gmail.com
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Abstract

A combined optimal dividend/reinsurance problem with two types of insurance claims, namely the expected premium principle and the variance premium principle, is discussed. Dividend payments are considered with both fixed and proportional transaction costs. The objective of an insurer is to determine an optimal dividend–reinsurance policy so as to maximize the expected total value of discounted dividend payments to shareholders up to ruin time. The problem is formulated as an optimal regular-impulse control problem. Closed-form solutions for the value function and optimal dividend–reinsurance strategy are obtained in some particular cases. Finally, some numerical analysis is given to illustrate the effects of safety loading on optimal reinsurance strategy.

Information

Type
Research Article
Information
Probability in the Engineering and Informational Sciences , Volume 30 , Issue 2 , April 2016 , pp. 224 - 243
Copyright
Copyright © Cambridge University Press 2015 

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